Non-life insurance profitability jumps 17% in H1


KARACHI: The non-life insurance sector’s profitability has jumped by 17 percent in the 1st half of current year over the same period last year, which analysts attribute to the burgeoning economy of the country.

The combined profitability of non-life insurance sector totaled at Rs 3.3 billion during the period under review as compared to Rs 2.8 billion in the last year.

“Pakistan’s insurance sector is reaping the benefits of a growing economy coupled with the insurance sector reforms, soaring trade activities, improving per capita income and competition among insurance sector companies, which are driving the current growth in the insurance sector”, pointed out analysts of the sector. Moreover, higher interest rates and tax exemption on capital gains also supported the investment income of the companies, which provided further impetus to the insurance bottom-line.

The government introduced reforms in the insurance sector in 2000 and since then, this sector has witnessed visible growth and if we go by the claims of the Federal Minister for Commerce, Humayum Akhtar, who told newsmen a few days back that this sector has grown by 20 percent since the introduction of reforms.

“Major factor behind this growth was increase in underwriting business, well supported by growth in investment income, thanks to the extension of capital gain tax exemption for insurance companies during FY08,” believed Hariz Dagia, analyst at Jahangir Siddiqui Global Markets.

Sector’s net premium in 1st half of 2007 increased by 13 percent to Rs 8.8 billion as against Rs 7.8 billion in the same period last year, whereas, net claims stood at Rs 5.3 billion, depicting an increase of 11 percent. Although income from underwriting business of the sector augmented by 21 percent to Rs 1.2 billion against Rs 1 billion in 1st half of 2006 but this healthy growth did not fully trickle down to the bottom line, mainly due to higher general and administration expenses which increased by 17 percent to Rs 3.1 billion as compared to Rs 2.7 billion last year. Investment income as a percentage of total income, on the other hand, remained at 91 percent.

During the period under review, claim ratio of the sector depicted a slight decline of 100bps to 61 percent versus 62 percent in 1st half of 2006. Similarly, combined ratio of the sector stood at 79 percent versus 80 percent in 1H 2006. Moreover, expense ratio of the sector stood at the level of last year, i.e. 18 percent.

Analysts see further growth in this sector particularly in non-life insurance as insurance companies are launching a number of new insurance products


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